By Thomas Mielke
The pandemic has been impacting businesses across geographic fault lines and industry segments. However, despite the fact that the hospitality sector has undoubtedly been one of the hardest hit, it is also important to recognise that the industry is experiencing a rather remarkable period of steady leadership – and with it comes the firm hand of a tried and tested leader, one who has seen and dealt with a variety of different crises and turbulences and who, one would hope, has gained the trust of ownership, the shareholders and the stakeholders.
The Status-Quo: “Nobody Moves!”
AETHOS has been tracking CEO turnover at the 50 largest public or privately-held hotel companies for well over fifteen years and there have been since only two years in which there was less ‘shuffling of seats’ for the top job than in the recent past. In 2014, coincidentally the year in which the United Nations declared Ebola an “international public health emergency” but which also saw a continued uptick in global terrorism, we saw only two hotel CEOs change their jobs (at Wyndham and Shanghai Jin Jiang) – everyone else seemed to be too busy dealing with the going concerns and preparing for the ‘super-mergers’ which followed in 2015 (e.g., Marriott/Starwood, Accor/FRHI). Going further back in time, 2009 also stands out as another year of remarkable stability – although the global economy was in shatters, or most likely exactly because of it, hotel companies around the world kept a firm grip on their C-suite to steady the waters and to avoid any unnecessary uncertainty or distractions that might come with a change in CEO.
Last year, we saw new appointments at Extended Stay, for example, Red Lion Hotel Corporation and Caesars Entertainment as well as Scandic Hotels. This year, we have (to date) witnessed four changes – at Minor International, MGM Resorts International, Disney and Millennium & Copthorne. All, with the exception of the departure at Millennium & Copthorne, occurred pre-Covid. For the moment, then, it would appear that this picture of the steady and calm leadership within the industry continues to hold true – but only just….
Yes, by and large, hotel companies have continued to stay loyal to those at the helm; however, average tenure of incumbent CEOs now sits almost at an all-time high of approximately 10 years. This, in combination with the incredible amount of pressure the organisations are experiencing on their operations globally (i.e., not only tumbling revenues and profits but also fundamental changes to demand patterns, buying behaviours etc.), increases the likelihood of investors (rightly or wrongly) wanting to call for radical changes to take place. Those may not happen imminently but happen they will.
Looking Ahead: “Ready – Get Set – Go!”
The years following the ‘calm oases’ of 2009 and 2014 were characterised by heightened activity as it relates to changes within the C-suite. Interestingly, though, after 2009 we saw a much more prolonged period of ‘instability’ within hotel companies across the globe. During the subsequent three years, CEO changes continued to increase, culminating in eight companies which were making leadership adjustments in 2012. In contrast, following the inactivity in 2014, the industry saw only one year of frantic shuffling of the CEO seats, with seven new leaders having been appointed in 2015 before activity then quieted down. Which pattern are we likely to follow this time around?
As the current pandemic is both a health crisis as well as an economic one, it is reasonable to expect that a scenario comparable to 2014/15, where there was a brief period of quick adjustments, is less likely. Instead, the hospitality industry is realistically having to prepare itself for a prolonged period of ‘corrections’ – one can assume that we will witness numerous acquisitions, or mergers, as well as considerable restructurings. All of these scenarios are likely to come with ‘build-in’ changes to the C-suite.
Moreover, the incumbent CEOs will be, more than ever, under the microscope; not only by their investors but also by their fellow executives and staff members. Have they taken the right decisions? Were they firm enough in their actions to protect the business, its employees and stakeholders from the worst of the crisis? Did they themselves take proportionate or substantial enough pay-cuts, for example, to show solidarity? Have they shown proactive leadership in futureproofing the business for the aftermath? Were smart actions taken to better manage costs, such as rent/lease payments, to try and spread the burden of the crisis more evenly amongst the stakeholders involved? The UK’s budget chain Travelodge, backed by significant hedge funds and an investment bank, is a good example of how divided the public opinion can be on whether the right actions were taken to protect the business (the ‘Travelodge Owners Action Group’, representing the majority of UK Travelodge landlords, has in the meanwhile started to evaluate whether it will execute a break option from Travelodge to create, under the umbrella of AGO Hotels, a new association with Accor). Again, such increased scrutiny is likely to trigger additional calls for someone new to come in and take the reign.
Additionally, considering the changing landscape and business environment, investors are, going forward, likely to be looking for different skill sets in their top man or woman – although the latter is, unfortunately, still very unlikely to be the case (just shy of 90% of the CEO seats continue to be held by men and essentially almost all of the incoming CEOs, since our first Hotel CEO Turnover report, are men – with very few notable exceptions as, for example, Jennifer Fox [2018], Alison Brittain [2016 ) or Trudy Rautio [2012]). After all, a CEO tasked to rapidly grow and expand the business is, more often than not, a different type of leader, coming with a different background of experiences, than one who is tasked to streamline operations, identify cost savings or to restructure the business.
Credit Where Credit Is Due
There is no doubt that Covid-19 has been devastating for the sector; however, it has also forced hospitality organisations and their CEOs to focus their attention, and to improve (amongst other areas) their ‘score cards’ as it relates to innovation and speed of action – traditionally areas which have not always been a forte for many of the internationally operating players. It seems results are starting to show, and this is to the credit of the incumbent CEOs. They have had to face unparalleled disruption and challenges which they have had to overcome, undoubtedly causing (just like for all employees across the organisational spectrum) large amount of mental and emotional stress, pain, and pressure. Maintaining a high alert level 24/7 over such a prolonged time-period is not easy.
Perhaps, then, besides some of the listed reasons for a likely uptick in CEO changes in the years to come, those might just occur for the plain and simple reason that someone with a new perspective, unburdened by previous fights and challenges, can also bring in renewed energy and drive and rally potentially divided share- or stakeholders to more readily back one common goal. It would seem that this is exactly what is happening in another subsegment of the hospitality industry as cruise line companies, renowned for their steady leadership, already saw earlier this year the ‘Heads of’ at Azamara Cruises, Holland America, Seabourn and Windstar depart (alongside the CEO of Norwegian [back in December of 2019]).
Originally published on Hotel News Now. Reprinted with permission from the author.
